Warren Buffett’s Instructions for his Family’s Wealth
A wise man once said, “Simplicity is the ultimate sophistication,” and no one embodies this wisdom better in the financial world than the “Oracle of Omaha,” Warren Buffett. Considered by many as the GOAT, he has built a net worth over $100 billion primarily by investing in a diverse set of companies through his company Berkshire Hathaway.
The Strength of Simplicity
A wise man once said, “Simplicity is the ultimate sophistication,” and no one embodies this wisdom better in the financial world than the “Oracle of Omaha,” Warren Buffett. Considered by many as the GOAT, he has built a net worth over $100 billion primarily by investing in a diverse set of companies through his company Berkshire Hathaway.
Despite his success with various types of investments, his investing recommendation for most investors is simple. Known for his long-term approach, Buffett’s support for index investing using the S&P 500 (500 of the largest US companies), offers invaluable guidance for investors of all levels.
Read on to learn why Buffett thinks simple is good. Very good.
Buffett Blueprint
In his 2013 letter to Berkshire Hathaway shareholders, Buffett revealed his own instructions for his family’s wealth management after his passing. These words echoed through the investing world: “Put 10% in short-term government bonds and 90% in a very low-cost S&P 500 index fund”.1
Why would arguably the world’s most successful investor recommend such a simple strategy? According to Buffett, he firmly believes that “long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions, or individuals.”
Power of the S&P 500
What makes the S&P 500 so compelling? Investors owning an S&P 500 index fund essentially own a small piece of 500 of the largest companies in the US. As the economy grows, these companies generally grow as well. Although the economy and stock prices can go up and down, S&P 500 Index funds have historically generated about 10% annual average investor returns over the past 10, 20, 30 and 40 years2. Stock prices may decline from time to time but have historically always gone on to new highs, rewarding patient investors with a long-term investing approach.
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Disclosure: 1. “Put 10% in short-term government bonds and 90% in a very low-cost S&P 500 index fund.”, “long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions, or individuals.”: https://www.cnbc.com/2017/02/26/3-ways-to-invest-like-warren-buffett.html 2. S&P 500 return: Where applicable, as of June 30, 2024, S&P 500 return assumes an initial $1,000 investment, 40-year annualized return of 11% (Source: Bloomberg Finance LP). It is not possible to invest directly in an index. This product invests in an ETF aiming to track the S&P 500’s performance. Results may vary due to expenses and other factors. Returns before ETF fees. Diversification is not a guarantee of profit or protection against loss. 3. Free with Beanstox Simple. Learn About Pricing.